Wales has extended its lead as the UK’s top-yielding region for landlords, according to Paragon Bank’s latest Buy-to-Let Yield Report.

The average gross rental yield in Wales rose to 8.84% in the third quarter of the year, up from 8.59% in the previous quarter. It marks a continued rise since early 2023, when yields averaged 7.13%.

Northern regions also performed strongly, with landlords in the North East achieving 8.16% and those in the North West and South West both recording 7.81%. The Yorkshire and Humber followed closely at 7.80%.

At the other end of the scale, landlords in Greater London generated the lowest returns at 5.65%, with the South East at 6.49%.

On an annual basis, Wales recorded the largest increase in yields, rising by 0.86 basis points compared with the same period last year. The East Midlands (+77bp), West Midlands (+42bp) and East Anglia (+35bp) also saw notable improvements.

While regional variations remain marked, overall average yields across the UK dipped slightly from a 14-year high of 7.12% in the second quarter to 6.97% at the end of September.

STUDENT SECTOR REMAINS STRONG

The start of the new academic year brought renewed strength to the student housing market. Properties in student postcodes generated an average yield of 7.31%, compared with 6.65% in non-student areas. Yields in student areas have climbed steadily since the start of the 2024–25 academic year, when they averaged 7.17%.

By property type, houses in multiple occupation (HMOs) continued to deliver the strongest returns, with yields rising slightly to 8.48%. Terraced houses followed at 6.27%, while flats remained stable at 6.28%.

Louisa Sedgwick, managing director of mortgages at Paragon Bank, said: “With 30 years of buy-to-let lending data, we are in a unique position to offer insight into landlord trends.

“Typically, regions with lower average property values and sustained high levels of tenant demand are generating higher yields. We see this clearly across northern England and Wales and that is reflected in landlord demand for new properties in those locations.”

She added: “Student property has always been popular with landlords and that is reflected in both higher yields generated in known student postcodes and HMO properties that typically house students from their second year onwards.

“We expect this to continue to be the case despite uncertainty over university funding, particularly driven by domestic students.”